Audit shows bond guarantee program operating within backing capacity; board adopts annual status report

State Board of Education committee members reviewed the State Auditor's Office audit of the Permanent School Fund (PSF) bond guarantee program covering fiscal year 2024 and adopted the annual report on the program's status.

John McGatty of the Permanent School Fund Corporation summarized the SAO's findings and fielded questions from the committee. He said the SAO reviewed whether the bond guarantee program was operating within its backing capacity and concluded the program was well within capacity for the year under review.

McGatty told the committee that, as of the end of the last fiscal year, the program was guaranteeing roughly $125'$126 billion in bonds. He reported the state's governing capacity at that time was about $165 billion, while the federal (IRS) capacity was about $235 billion; both capacities move with the fund's book value. McGatty added that federal rules allow up to five times the current book value, while state board rule currently sets a lower governing capacity at 3.5 times the book value and state law governs the state limit.

Committee members asked for the audit materials; McGatty said the report was included in the meeting notebook and that staff could provide copies if any member did not have them. After brief discussion, a motion to adopt the annual report of the bond guarantee program was made, seconded and approved by voice vote; no roll-call was recorded in the transcript.

Why it matters: The bond guarantee program supports school district borrowing by guaranteeing bonds using the PSF backing. Capacity figures determine how much the program can guarantee without exceeding prudential limits; the numbers reported indicate the program had room under both state and federal caps at the end of the reviewed fiscal year.

The board did not take additional policy action beyond adopting the annual report; staff said the numbers can shift as the PSF book value changes.